In May of 2009, President Obama signed into law 800 pages of legislation related to how credit card companies will do business, effective February 2010. Over the past two years, as a result of the economic crisis that hit the banking industry, credit card companies changed interest rates, credit limits and fees, leaving many consumers in worse situations than ever. Consumer credit card debt, on average, doubled during the same period. The bill is designed to provide standard operating procedures for credit card companies that will benefit card users.

The new bill prohibits a credit card company from raising interest rates within the first year that the consumer holds the card. Promotional rates are required to be in effect for at least 6 months. In additional, credit card limits cannot be raised without the permission of the credit card holder. 

Credit card companies will be required to mail out bills 21 days in advance of the due date and fees for services are to be reasonable and proportional. In other words, a late fee for a small balance will be less than a late fee for a larger balance. Also, payments made above the minimum payment are required to be applied first to credit lines with high interest rates.

Young people, such as college students, will be unable to receive a credit card unless they are able to have an older, independent person’s signature who can be responsible for the debt, such as a parent or spouse. The hope is that this will keep young people from accruing more debt than they are able to handle early in life.

Finally, the law provides for a strategic plan for financial literacy education. Already this is available through the Cooperative Extension Service and other local agencies. This is good news as we continue to help people make better decisions in financial matters.

The law does not leave consumers without some responsibility. Whenever you utilize a credit card, you need to keep track of your expenses. You should read all mail and electronic correspondence from you credit card company to be aware of all charges and fees for services. By paying bills on time, you protect your credit score. You should also try to make a payment of at least one third of the balance, rather than just the minimum payment.

For more information about the new credit card law, or about how you can manage your finances better, contact Jayne McBurney Cubilla, Family & Consumer Sciences Agent with the Johnston County Cooperative Extension Service at 919-989-5380, or you can e-mail Jayne at jayne_cubilla@ncsu.edu.